FDI in Indian Telecommunications Industry

FDI in Indian Telecommunications Industry is likely to face a hike from the current 49 percent to 74 percent as has been announced by the Union cabinet on 2005. For that, the Union Cabinet will take into account the concerns of security agencies and the left parties.

This rise in the foreign direct investment in the telecommunication market in India will enable companies like Bharti Tele-Ventures and Hutchison Essar to modulate the foreign stakes in their companies that have already acquired a range between 67-69 percent of their assets. Considering the unnerving growth in the telecom industry in India which accounted for around 30 percent every year, the Union Cabinet decided for the hike in foreign direct investment as it will facilitate the capital inflows in the industry. The mobile segment acquires the largest share in the Indian telecom market as it has been estimated to witness a double rise in the past 2 years.

Finance Minister of India, Mr. P. Chidambaram has proclaimed that the decision about increasing the foreign direct investiture in the Indian telecom market have been decided with the aim to draw more and more capital investments in the telecom sector which is estimated to be the capital intensive telecom sector. This step has also been planned to make the entire system in the telecom market lucid and methodical. It has also been notified that 2 companies in the telecom sector in India have already experienced more than 49 percent of foreign direct investment. FDI in Indian Telecommunications Industry also demands the majority directors on the board that comprise of the chairman, the managing director and the chief executive officer to be non-migratory Indian citizens.

The 74 shares occupied by the Indian telecommunication industry would involve all the foreign direct investments that have mainly come from the non-residential Indians, foreign currency convertible bonds, foreign institutional investors, convertible preference shares, and depository receipts on an direct and indirect basis. The companies that is receiving or will receive the foreign direct investment in the years to come are prohibited from transferring any sort of information or data apropos foreign direct investments or things related to that to the contributors or any destinations outside India. The step taken for the increase in the FDI in Indian telecom industry will boost up the country's economic condition. Foreign direct investment is one of the major contributors in the accretion of India's economy and thereby it has been highly needed by each sector in Indian telecommunication industry. By 2007, the telecom sector will be requiring 1,60,000 crore for development purposes among which 30,000 will come from the local markets.

FDI in Indian Telecommunications Industry is one of the most crucial parts that have caused such a hike in the telecom market so far. India, in the past 15 years have received 10,000 crore of foreign direct investment and 26 percent of the sum have been invested on the cellular segment. Besides the cellular and long distance sectors, the experts have estimated a majority of foreign investment in the sectors such as V-Sat, Public Mobile Radio Trunked Services and Global Mobile Personal Communications Services. These segments have till now witnessed an FDI cap of about 49 percent in totality.